The $39 billion in subsidies provided by the Biden administration for semiconductor production will soon be distributed to companies, but before that happens, the U.S. Department of Commerce will introduce new regulations to ensure that these funds do not fall into the hands of relevant countries, especially China. The Commerce Department on Friday released final rules implementing the national security protections of the CHIPS and Science Act. It extends two provisions of the Act. The first provision prohibits grantees for ten years from expanding their semiconductor manufacturing capabilities, including wafer production, in foreign countries of concern.
The second provision restricts recipient countries from engaging in certain joint research or technology licensing activities with relevant foreign entities, but allows the development of international standards, patent licensing, and the use of foundry and packaging services. In this case, these entities mainly refer to China and Russia.
The new rules also classify semiconductors as products critical to national security, imposing tighter restrictions on them. It covers chips with unique capabilities critical to U.S. national security needs, including current-generation and mature node chips for quantum computing, chips in radiation-intensive environments, and chips used in other specialized military capabilities.
U.S. Commerce Secretary Gina Raimondo stressed in a statement to Congress last week that no funds from the CHIPS Act must flow to China. "We must remain absolutely vigilant that every penny of this funding cannot help China surpass us," Raimondo said.
The bill states that if any recipient of funds violates these restrictions, the Department of Commerce can require the return of federal funds.
President Biden signed the CHIPS and Science Act into law in August 2022, providing $52.7 billion for U.S. semiconductor production, research, and workforce development, including $39 billion for tax incentives and other semiconductor manufacturing incentive subsidies.
The CHIPS Act was introduced due to a global shortage of semiconductors, causing production problems in cars, graphics cards, game consoles, and almost every other product with chips. It is hoped that reducing reliance on the Asian region - especially Taiwan, which has been a source of tensions with China - will make the impact of any similar situations in the future less severe.